There’s nothing easy about tax-planning. But when it comes to selling or transferring your business, planning for the greatest possible tax advantage can make a difference in the millions. Just how do taxes impact the transfer of your business or estate?
Capital Gains Taxes
Capital assets are assets that appreciate over time such as land, stocks, bonds, and livestock. When the assets are owned for more than one year, they can qualify for long term capital gains treatment and are subject to capital gains tax which can range from 20 percent up to 30 percent, when combining state and federal.
Estate tax is a tax levied on the net value of your estate before distribution to your heirs. Currently, the first $5.25 million of your estate is exempt from taxation, but any amount over $5.25 million is taxed at 40 percent.
In the year of your death, your spouse or the executor of your Will will be required to file an estate income tax return. The taxable rate for this varies by state.
Taxpayers are permitted to give annual gifts totaling $14,000 per person tax free. Gifts larger than $14,000 need careful analysis by your tax professionals as they may create taxes owed at the time of the gift or create a larger estate tax problem at death.
Tax law can be complex and difficult to understand, but a qualified tax professional can help you establish a plan to minimize the impact taxes on your business transition or estate.